VELDHOVEN, Jan 17 (Reuters) - ASML, the world's
leading provider of tools for making computer chips, warned that
its sales in 2013 would be virtually flat, due to weaker orders
and stalling demand for personal computers.

ASML, which has been investing heavily in new technology to
enable electronics makers to make smaller chips, said its sales
fell 17 percent in the fourth quarter, the lowest level since
the first quarter of 2010.

New orders for the machines used by the top makers of smart
phones, computers and other devices to create electronic wafers
came in at 667 million euros, well below a market forecast of
800 million euros.

ASML's shares fell initially fell as much as 4.7 percent on
its weak outlook but later rose as much as 7 percent as analysts
pointed to ASML's new production technology, its dividend
increase and possible share buyback programme.

"ASML could potentially implement a 700 million euro
buyback," said Credit Suisse in a research note.

The stock was up 6.7 percent at 51.23 euros by 1604 GMT.

ASML, which derives its revenue from a mix of traditional
computer memory chips and chips used in hand-held tablets and
smart phones, said full-year sales would be roughly 4.7 billion
euros.

It said the first quarter would be weak because of slow
sales in the PC market and the cost of investment in EUV, or
extreme ultraviolet, light technologies for making next
generation, smaller chips which are not yet on the market.

A pick up in the market in the second half of the year will
offset the weak first quarter, but most likely not enable it to
grow its annual sales, it said.

The Dutch firm, considered a barometer for the tech sector,
reported better-than-expected net profit of 298 million euros
($396 million) on sales of 1.02 billion euros, largely thanks to
a tax benefit. Analysts in a Reuters poll had forecast profit of
185 million euros on sales of 1.029 billion euros.

ASML, whose customers include Samsung Electronics
, Taiwan Semiconductor Manufacturing (TSMC)
and Intel Corp, said the driver for a recovery in the
second half would be chips used in smartphones, tablets and
other mobile gadgets.

"There is not a lot of anticipation for PC growth this year.
We will basically see a continuation of what we saw in 2012,"
chief financial officer Peter Wennink said. The transition to
using newer chips could drive slighter higher sales.

"The PC market will remain a very important indicator for
us. The overall market will pick up in the course of the year,"
he said.

NEW TECHNOLOGY

ASML said it would continue to return money to investors
through dividends, and would announce a new share buyback
programme next month after shareholders in Cymer Inc -
a supplier of lithography light sources used to make chips -
approve ASML's takeover offer.

It said it expected to get a 700 million-euro boost from
pre-sales of EUV tools this year, and added the memory sector
could also see a recovery later in the year.

The quest to produce ever smaller, more efficient, more
powerful chips pushed ASML into two important deals last year.

It agreed to buy Cymer in order to speed up the development
of its tools using EUV, and also secured funding from Intel,
Taiwan Semiconductor Manufacturing, and Samsung for the research
and development of EUV technology and of equipment for making
larger wafers.
(Reporting by Anthony Deutsch, writing by Gilbert Kreijger;
Editing by Sara Webb and Sophie Walker)